Study: Independent shops pose threat to car dealerships

CHICAGO (April 23, 2014) — In a study that may come as no surprise to independent tire dealerships, Cars.com predicts that in a growing vehicle service market, auto dealerships are at risk of losing a substantial portion of their fixed operations revenue to national auto service chains and local repair shops.

According to the 2014 Service and Repair Report commissioned by Cars.com, a car shopping website, consumer perceptions about cost of repairs, lack of price transparency and underutilization of effective digital marketing strategies are the main challenges to car dealership profitability in the service area.

“With the average age of vehicles on the road increasing, and inevitably going off-warranty, (car) dealers are being challenged to acquire and retain service customers,” said Barbara Mousigian, vice president of product at Cars.com.

“Since consumers do not have a good sense of repair costs, they are suspicious of pricing and tend to look elsewhere for a trusted service provider. By promoting price transparency and highlighting dealership quality and convenience online, dealers have the opportunity to build trust with shoppers and ultimately win their business.”

The study was conducted by Gfk USA, a unit of Germany’s Gfk SE. The results are based on responses from more than 800 vehicle owners in the U.S.

Key findings included:

Price Perception: More than half of respondents said they believed car dealership service departments are the most expensive service option, regardless of repair type. Consumers position independent repair shops as the least expensive option.

Strength of Reputation: Online consumer reviews rank behind only technician certification level and price guarantee/warranty in importance to consumers when selecting a vehicle service provider. Car dealers have the potential to attract consumers by promoting their online reputations, specific to service, in addition to new and used car sales online, according to the study.

Initial Preferences: All things being equal, and when little is known about the repair facilities, 27 percent of respondents preferred to have their vehicle serviced at a car dealership, while 43 percent of shoppers report no preference. National service chains and independent shops are initially less desired — 13 and 18 percent, respectively — though showcasing benefits through effective digital marketing tactics helps shift consumer preference, the study said.

Cars.com said it has added features to its website that include a service tab on the dealer profile page, top placement for dealers’ service listings in the new service directory, and promotion of dealers when consumers use the service and repair price estimator tool.